Avon Case Study Analysis
During the 1990s, Avon began to lose its appeal to the public. The number of new company sales representatives had begun to stall; and by 1999, the U.S. sales representatives had dropped 1% from the previous year (Pearce and Robinson, 2005, pg.423). It was at this critical time that Andrea Jung, an Avon saleslady herself, was hired as CEO to help take the company in a new direction. A turnaround grand strategy was envisioned in 2000 to help reenergize the flagging U.S. sales force, which was facing fierce competition from Mary Kay and L'Oreal and seeing profit margins declining. Jung's new strategy focused on the following: 1)
"reinvigorating the brandwhich had an aging-grandmother feel to itwith new products, new packaging, and a new ad campaign" (Pearce and Robinson, pg.423) 2)
beauty-advisory training for representatives
expand Avon's online sales
expand the multilevel sales program
Given the facts of this case, this paper presents both sides of the debatewas Jung's turnaround grand strategy properly focused and directed?
Jung's Grand Strategies Succeeded
According to Pearce and Robinson (2005), downsizing, restructuring, and reengineering reflect a "critical stage in strategy implementation wherein managers attempt to recast their organization" (pg. 15). This is exactly what Jung did using a turnaround grand strategy, which began with a form of retrenchment (pg.212). The turnaround strategy's success lies with a company's ability for management to be effective and efficient in the retrenchment process. A firm that has seen either a steep or gradual decline as Avon had, more than likely face a sharp cost reduction in order to stabilize their operations and restore their profitability (pg. 212). Jung focused on restructuring the company's sales force through cost reduction. The first thing Jung did to cut costs was consolidate the management. The company went from having 15 layers of management down to eight. This cut about 30% of its senior and middle management out within the first year (Prior, 2006). Two long-term objectives Jung then went to work on were Avon's competitive position and her sales representative's training and individual development. One of the keys to Avon's success has been its ability to enable representatives to improve penetration of new and existing markets. To make that happen, Jung expanded the number of products offered to long-time customers. She increased advertising to better service the core markets. Jung believed that Avon could beat the department-store lines by upgrading its own actand sticking with direct sales. She acted quickly to move Avon up the market chain by overhauling colors, textures and packaging. Until then Avon had operated on the assumption that women around the world wanted different beauty products. Jung believed all women had similar notions of beauty, therefore, would buy the same products without having to customize as much for local markets. She rolled out more global lines, which was part of Avon's push into new countries. Jung knew that Avon's direct sales force distribution network was not reaching the millions of modern women in the workforce. Avon had to position itself, so that its customers could choose whether they wanted to buy from a rep, on the Internet, or at a store. Jung expanded Avon's lines of cosmetics, jewelry, and clothing by adding nutritional supplements and vitamins -- a line that the company said could generate $300 million in five years. Taking a cue from the Avon competitor Mary Kay, Jung launched "Beauty Advisor," a program that turned Avon representatives into beauty consultants, who help customers choose the clothing and makeup that work best for them. Jung's strategy proved its worth by significantly increasing revenues and stock price. Avon's profits also tripled (Kratz, 2006, pg.170). Avon's image was given a facelift during this time because new beauty products were introduced while...
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